Moody's Reviews SBC Credit Rating

THE JOURNAL RECORD, August 14, 2002 | Go to article overview

Moody's Reviews SBC Credit Rating


NEW YORK (AP) -- SBC Communications had its Aa3 senior unsecured long-term credit rating placed on review for possible downgrade Tuesday by Moody's Investors Service.

The announcement was not unexpected after Moody's last week said it was re-examining the San Antonio-based Regional Bell Operating Cos., or RBOCs, on a number of industrywide pressures. Concerns include growth of wireless communications, unfavorable regulatory pricing policies and cable providers' broadband success.

SBC responded to Moody's assessment of the industry last week by placing much of the blame for the pressures it faces on regulators.

"It is important to note that two of the three revenue pressure points Moody's identified are either the result of -- or affected by -- regulatory decisions," SBC Chief Financial Officer Randall Stephensen said. "Mandatory, below-cost wholesale prices are encouraging economically irrational behavior in the marketplace. We are losing customers to companies that are simply repackaging our service, without reinvesting in the nation's telecom infrastructure."

Stephensen also said cable companies dominate the broadband market because of an "unlevel playing field" and that these companies are "unfettered by rules that affect competitor services."

Moody's mentioned BellSouth and Verizon Communications in its report last week. Moody's rates BellSouth as an Aa3 with a negative outlook. It rates Verizon Communications A1, and has it under review for a possible downgrade.

Moody's assessment of the RBOCs is more negative than that of rival rating agency Standard & Poor's, however.

Last week, S&P issued a report saying that while the U.S. telecommunications industry has seen a rapid deterioration in credit quality over the past six months, "downside risk to the ratings on the three investment-grade RBOCs is very limited for the foreseeable future."

S&P rates SBC Communications double-A-minus with a stable outlook, BellSouth single-A-plus with a stable outlook and Verizon Communications single-A-plus with a negative outlook.

SBC Communications units provide local and long-distance phone service, wireless and data communications, paging, high-speed Internet access and messaging, cable and satellite television, security services and telecom equipment.

New York Stock Exchange-listed SBC Communications shares closed Tuesday at $26.63, down 23 cents, or 0.8 percent.

Retail sales rise 1.2%

WASHINGTON (AP) -- Consumers, taking advantage of free-financing offers, snapped up cars and trucks, helping to boost retail sales by a brisk 1.2 percent in July.

But the Commerce Department's report Tuesday also showed that shoppers trimmed spending on other goods, including furniture, electronics, building supplies and clothes, a sign that consumers have grown more cautious amid stock market turmoil and economic uncertainties. Excluding sales of automobiles, retail sales rose just 0.2 percent in July.

Still, the fact that consumers were still buying offered a dose of good news for the struggling economic recovery. Consumer spending accounts for two-thirds of all economic activity in the United States.

`'In the midst of all the problems in the markets, people are still willing to part with their hard-earned cash," said economist Joel Naroff of Naroff Economic Advisors.

The 1.2 percent increase in retail sales in July followed a revised 1.4 percent advance in June, stronger than the government previously reported.

Worried about sales, some big auto makers recently brought back generous incentives, including free-financing deals, to lure buyers. Sales at automobile dealers rose by 4. …

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